Cho, Young-Hyun, Linton, Oliver and Whang, Yoon-Jae (2006) Are there Monday effects in stock returns: a stochastic dominance approach. Discussion paper, 568. Financial Markets Group, London School of Economics and Political Science, London, UK.
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We provide a test of the Monday effect in daily stock index returns. Unlike previous studies we define the Monday effect based on the stochastic dominance criterion. This is a stronger criterion than those based on comparing means used in previous work and has a well defined economic meaning. We apply our test to a number of stock indexes including large caps and small caps as well as UK and Japanese indexes. We find strong evidence of a Monday effect in many cases under this stronger criterion. The effect has reversed or weakened in the Dow Jones and S&P 500 indexes post 1987, but is still strong in more broadly based indexes like the NASDAQ, the Russell 2000 and the CRSP.
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